A couple of lenders advertise that they sign off on loans to the unemployed as well. A loan is a sum of money you borrow from a lender to be paid off in an agreed period of time. Of course, you need to have some income to pay off the debt, but borrowing money as an unemployed person sounds counterintuitive.
Well, borrowing money when you are out of work has become possible because a lender exempts you from having a steady income source. It does not mean, under any circumstances, that you can take out a loan even if you cannot pay back the money.
You must have a passive income source, like a rental income or income from freelance projects, which will serve as the basis for deciding how much you can borrow.
No lender will lend you money if you are a complete broker. By “unemployed,” lenders mean that you do not have a full-time job. It does not mean that you have no income at all.
Now you know that you can borrow money even if you are unemployed or rather without a full-time job. The next question that flashes across people’s minds is how much money they should borrow.
How much money can you borrow when you are out of work?
Direct lender loans for the unemployed in Ireland are aimed at those people who need money during an emergency. Therefore, the size of these loans is very small. The maximum amount you can borrow may be up to €1,000. This is what you will likely find on the lender’s landing page.
When you apply for these loans, you will hardly find any lender giving you this small amount. This is not a very small amount of money that you can afford to pay back without having a stable income source.
Unlike instalment loans, you will have to pay off the unemployed loans in a lump sum. The repayment length of these loans is not more than a month. Imagine a scenario where you borrow €1,000 now, and after a month, you are to pay €1,050 (an estimated figure).
Do you think you will be able to settle the debt? Your financial circumstances will not change overnight. If it was difficult for you to pay €1,000 from your pocket, how would you be able to pay interest on top of that?
Do not forget that an online loan calculator provides you with an estimated value that does not include processing and monthly fees. The estimated value will go much beyond €1,050 if actual interest rates are applied.
At the time of applying for these loans, you will likely get approved for not more than €700. Lenders expect that small emergencies can be funded from this small amount, and when you do not have a stable source of income, they can put you - neither themselves nor you - a risk.
It is clear that a lender will lend you only a small amount of money provided you prove your repaying capacity. If your passive income is not sufficient to cover the debt expense, you will be straightaway turned down.
What do you need to look out for?
There are some features that may tempt you to apply for these loans. For instance, these loans are approved instantly. Because you can get money transferred to your bank account, you will find these loans the most appropriate, but wait. There are some things you need to look over before applying for these quick cash loans on the same day in Ireland.
- Interest rates
You increase the risk on the part of a lender while borrowing money when you are out of work. Even though your passive income is sufficient to prove that you can repay the debt, a lender will be skeptical about your repaying capacity.
Since the default risk is high, you will be imposed higher interest rates. It can be quite challenging to pay back the debt. Therefore, be careful while taking out an unemployed loan. Although a lender will not lend money unless they check your affordability, it is your responsibility as well to carefully examine your repaying capacity.
- Borrowing without a credit check
Unemployed loans are approved after a lender runs a hard credit check, meaning you will lose your credit points. Each hard inquiry will pull five credit points. People with a good credit rating will not be much affected, but these loans are widely used by borrowers with bad credit ratings.
You will likely apply to a lender who offers loans in Ireland with no credit check if you already have a horrible credit report and you do not want to further damage your credit rating.
These loans can be even more expensive than standard unemployed loans. This is because now a lender does not have a clear idea of your past financial behavior. They will make a decision simply based on your income. They will not have a clear understanding of the risk involved in lending you money. To lessen the impact of risk, they will charge very high-interest rates.
How can you get the best deal when you are unemployed?
If you are out of work and need to borrow money, you can get the best deal with the following tips:
- You should have a good credit score. If you have a bad credit rating, it should still be closer to the range of a fair credit score.
- Your passive income must be sufficient. A higher income can help qualify for the loan at affordable interest rates.
To wrap up
You can borrow only a small amount of money if you are unemployed, usually not more than €1,000. However, it is still not that easy. You should try to have a solid passive income source, and your credit rating must be good. If you want to borrow money despite a bad credit rating, it should not be extremely bad. Try to maintain it closer to a fair credit score.